1st tranche of NFA rice imports to arrive soon

The state-run National Food Authority (NFA) will be bringing in the first tranche of the initial 488,000 metric tons (MT) of imported rice the country will be buying for 2006.

NFA Administrator Gregorio Tan Jr. said that by the end of January, an initial volume of 87,500 MT will be unloaded in Manila, the next 175,000 MT will come in by February while the balance of 87,5000 MT should be in by March. Most of the volume will be coming from Vietnam.

The NFA is importing an initial 350,000 MT of rice to beef up its inventory while the private sector and farmer groups were allocated an import volume of 138,000 MT. The private sector is expected to bring in the additional volume by May 31, when the onset of the lean season for rice begins.

Tan explained that current warehouse stocks of the NFA are likely to fall below the comfortable 15-day stock as improved farmgate prices of palay, now averaging P10 per kilo, are prompting farmers to sell to traders which offer slightly higher prices than the agency.

"We were anticipating favorable palay prices with the harvest season and expected farmers to unload their produce to the traders. On the other hand, with supply being sucked up by traders, we have to also ensure that prices will remain reasonable and supply is adequate," said Tan.

The NFA which last year, imported a total of 1.8 million MT of rice due to the lingering effects of the EL Nino phenomenon wants to further frontload its rice import requirements for 2006 in view of the anticipated recovery in fuel prices that drove up fuel and transport costs of rice in 2005.

"While fuel prices have gone down, we expect this to recover shortly and to again affect rice prices. We also have to position early on because of the projected tightness in world stocks next year," said Tan

Previously, Tan noted that the world’s biggest rice producer and exporter. Thailand temporarily suspended its exports in September-October to secure its domestic requirements.

On the other hand, China’s rice imports have been steadily increasing in recent years and is expected to raise its import volumes to feed its burgeoning population while its rice farmers have been shifting to planting high-value commercial crops.

"We have to ensure that we have ample supply to stop potential speculation that would result in higher prices of rice in the world market," said Tan, adding that rice prices are expected to increase along with the increasing fuel and transport costs.

Tan said the initial volume to be imported by the NFA is expected to come by end-January after the harvest season and it should not dampen domestic rice prices.

He said the final import requirements of the country will only be determined after the crop production survey of the Bureau of Agricultural Statistics (BAS) is by end January or early February.

Earlier also, rice experts noted that while world rice production which has been keeping pace with the growth in population, there is increasing supply pressures from China and other major-rice consumers like India.

Duncan Macintosh, spokesperson of the International Rice Research Institute (IRRI) said that the entry of China in the rice market in the last three years, has considerably raised prices of rice in the world market, and the trend is likely to be sustained.

He noted that in 2004 alone, China imported one percent of its domestic requirement and this has resulted in a 40 percent increase in world prices of the staple.

Last year, Thai rice prices which is often used a benchmark for rice prices in the world market, averaged $260 per metric ton. In 2005, Thai rice averaged $290 per MT and traders said this is likely to hit the $300 per MT level.

China which is already a major rice producer, still faces production shortfalls as the emerging economic power house accelerates its urban and economic development. At the same time, the government also eased rice planting restrictions on farmers, thus, many have abandoned rice farming in favor of more high-yielding and high-value commercial crops.

These developments will have far-reaching implications for rice net importers like the Philippines.

This year, the rice importations of the NFA have gone up significantly from the 2004 average of $250 to $260 per MT to this year’s level of $80 to $290 per MT. For 2004-2005, this has cost NFA some P28 to P29 billion.